The TDD is a bulk asset sale form. The state puts an escrow requirement on the BUYER to withhold (initially) the max tax rate in NJ on the gross sales price. You fill out the TDD to show the state what the estimated gain or loss will be on the sale of assets and they will reduce the escrow requirement accordingly.
For example, the state will require the buyer to withhold $9,000 on a $100,000 sale, as they base the withholding off the gross consideration paid. But if you show the state, on the TDD, that there is no gain on the sale, they will reduce the escrow requirement to zero.
It is your clients best interest to file a TDD as soon as possible, to reduce that escrow obligation. But to answer your specific question, think of the escrow funds as tax withheld for the benefit of your client. Your client will report that withholding on their applicable NJ return when they report the sale for tax purposes. But do not let the state use the default escrow determination, file the TDD with accurate information and send it back to them. Why let the state keep all these funds for months and months only to perhaps get it all back?
The TDD form is rather simple, and you can fax it back to the agent in charge of the matter. But you have a limited window of time before the sale in order for the state to accept and process the TDD. Otherwise, you will lose the ability to reduce the escrow.